Starting your own business can be very exciting, but the reality is that it can be very tough to get a new business off the ground.
Statistics indicate that out of every 5 businesses started, 4 will close within their first 3 years, so the chances of success are slim. However, if you are passionate about starting and running your own business, you won’t let mere statistics or long-odds get in your way!
If you are thinking about starting up this year, there are things you can do to increase your chances of succeeding. Here are 10 practical tips from the ByteStart team for anyone considering taking the plunge;
1. Why are you starting up a business?
The potential rewards can be great, however starting a business will not suit everyone, so you should be honest with yourself and consider whether or not you have what it takes to go it alone.
People want to start their own business for a variety of reasons, for some it’s the thought of building a successful multi-national business, for others it’s about being able to take control of their own life, working when and where they want.
Being fed up with your current job, is not really a good reason for wanting to start your own business.
Setting up on your own is a big deal. To succeed in business requires a lot of commitment, and patience. You will be faced with many new problems and have to learn lots of skills. You will need to be able to structure your time, and keep on top of your paperwork.
As a small business owner you will have to juggle a bunch of different tasks every day. And when you are starting up, you might well have to do deal with everything all by yourself. After a lifetime of being surrounded by colleagues, many people struggle to adapt to the life of a small business owner.
You are more likely to succeed if you have strong reasons for deciding to work for yourself, and a clear vision of what you want to achieve. Ask yourself these questions:
- What is the driving force behind your wish to set up a new business?
- Do you know exactly what your business will do?
- Will you be making the most of your strengths?
- Can you take decisions and work well on your own?
- Will your business make enough money for you?
- Where do you want to be in five years’ time? Will starting a business help you get there?
2. Evaluate the different business structures
One of the first tasks will be to decide which business structure to trade under. For most, new businesses this comes down to a choice between;
- Operating as a sole trader, also commonly referred to as being self-employed,
- Setting up a partnership,
- Forming a limited company.
As a business owner, the tax and legal obligations varies with each structure. The option you choose will be influenced by your own personal circumstances and your longer-term plans for the business.
You can read more about the specifics of each option in these guides;
- 5 things you must do when you go self employed
- Limited company or sole trader – which is best for me?
- 10 advantages of running your business as a limited company over being a sole trader
3. Honestly assess your skills
You should identify your key skills, and honestly work out what your weaknesses are. Don’t be afraid to ask your family or friends for their opinions.
Does the business you are planning to start allow you to make the most of your strengths?
The most successful business people know their weaknesses as well as their strengths, and are prepared to seek outside help where they need it.
4. Be realistic about the funding you will need
One of the main reasons why businesses fail is because they run out of money. Be very conservative when working out how much funding your new business will require. Some would say that once you’ve calculated the amount of finance you think you need, you should then double it!
It can take a while for a new business to build up customers and bring in money so it’s also important you stay on top of your cash flow management. Be watchful of what you spend, and make sure that you get paid on time.
You can read about all the available funding options in our dedicated Business Finance section.
5. Research the marketplace
Before you get started, it’s worthwhile talking to potential customers. By communicating with them, it will help you to understand what might make them buy from you.
Your research should help you determine whether there is a market for your product or service.
6. Know the competition
Don’t underestimate your competition. Spend time researching how your competitors operate, identify any weaknesses they have, and don’t be complacent.
7. Have a business plan
Although many people don’t believe business plans are worth the paper they are written on, even if you don’t consult your plan in the future, the process of writing one can be immensely helpful in structuring your thoughts.
If you need to seek funding, or plan to involve a business partner, you will most likely need an up-to-date plan. Read our Business Plan Guides for further ideas.
8. Consider the staff you may need
As your business expands, you may well need to hire people to manage certain aspects of your operation. You need to ensure they have the right skills for the job. Above all, you need to be able to “click” with the people you work with – this simply cannot be underestimated.
9. Seek professional advice
Many business owners say that their accountant is the most important adviser they could ever have. The services of a professional adviser can be invaluable and can make the difference between success and failure.
10. Biggest causes of failure
Most businesses fail for one of two reasons (or both) – not researching their market thoroughly, and not keeping on top of their cashflow. Keep an eye on these two issues in particular!
More help on starting a business
You’ll find plenty of useful advice on ByteStart to help you plan and launch a new business, and the following are essential reading for anybody thinking of going it alone;
- 5 things you must do when you go self employed
- Which business structure should you choose for your new business – sole trader, limited company, partnership or LLP?
- What insurance policies is your business legally required to take out?
- The secrets of getting a business bank loan
- How to attract more customers by developing a strong USP for your business
For more ideas, why not try our complete guide to starting a new business.